Firms brace for China ban on exports of critical minerals to the US

A decision by China’s Ministry of Commerce on Tuesday to ban exports to the US of gallium, germanium, and antimony is causing consternation among firms that need the materials to make computer chips, batteries, and military technologies. The move came a day after the Biden administration forbade exports of advanced chips and chip-manufacturing equipment to China.

China started rolling out export restrictions on various critical materials and their underlying processing technologies last year. But this is the first outright ban on exports and the first time the rules specifically target the US.

Its long-term implications for the US economy and national security seem severe. A recent report from the US Geological Survey (USGS) estimates that a ban on Chinese gallium and germanium exports could lower the US gross domestic product by $3.4 billion per year.

The economic losses will be felt mainly by the semiconductor industry, says Brian Hart, a fellow at the Center for Strategic and International Studies (CSIS). “Chips and energy are where this is going to hurt the most, and China knows that,” he says. “We saw the steps China took last year as a shot across the bow. This is definitely a major escalation.”

Gallium and germanium are two of the most critical metals for chips used in high-performance electronics. Gallium is vital for light-emitting diodes and advanced military radar; germanium is needed for fiber-optic cables and the infrared sensors used in night-vision goggles. Meanwhile, the semimetal antimony is key for fire retardants, batteries, ammunition, and machinery parts.

China is the world’s largest primary producer of all three materials. The country produces almost half of the world’s antimony, 60% of its germanium, and 98% of its gallium, according to the USGS. The US gets about half its supply of gallium and germanium directly from China, according to the USGS, and it produces no antimony, per the CSIS.

Perhaps anticipating tighter restrictions by China after it first placed export licensing requirements on gallium and germanium last summer, US firms started stockpiling the metals and scrambling for alternative supply options. China has not exported gallium or germanium to the US this year, according to market intelligence agency Project Blue.

But stockpiling is only a Band-Aid. The ban underlines the need to boost production outside of China and to recycle these critical materials, says Jack Howley, a technology analyst at the consulting firm IDTechEx. China’s restrictions on rare earth element exports last year ramped up investments in rare earth recycling technologies around the world, he says. That now needs to happen for gallium, germanium, and antimony.

“There’s a more and more convincing business case for recycling end-of-life devices that contain these materials,” Howley says.

China’s choke point on gallium is especially concerning. Gallium is a by-product of aluminum production from bauxite ore. China is the world’s largest aluminum producer, and by investing in gallium separation and refining technologies, it has amassed a “virtual global monopoly on gallium supply,” Hart says. “In theory, other countries could produce gallium, but it’s not economically viable when China can do it so much cheaper.”

Suppliers of the critical materials are paying attention. Canada’s Neo Performance Materials is the only company in North America that makes gallium at the required purity for semiconductor fabrication, says Vasileios Tsianos, the company’s vice president of corporate development. Neo refines gallium from electronic manufacturing scrap and has an annual production capacity of 30 metric tons (t) compared to the global demand of about 700 t, he says.

Neo is trying to increase gallium production, Tsianos says, but the challenge is getting enough electronic scrap feedstock. “Now that gallium cost has doubled, there is an economic case for both primary production and recycling,” he says. “More bauxite and alumina processors outside China are also exploring gallium production, and that’s exciting.”

Meanwhile, the Canadian germanium producer Teck Resources is also “examining options and market support for increasing production capacity,” says company representative Maclean Kay.

All of this will take time. Until then, China’s actions will shake up global markets, creating price spikes and disrupting supply chains. “There’s no dial that can be turned up for secondary or even primary sources in many cases to supplement the potential loss of these critical materials in the short term,” Howley says. “That will have an impact.”